Foreign investment surges

By Prem Khanal

KATHMANDU, June 12 - Despite the shrinking global flow of Foreign Direct Investment (FDI), along with the worsening law and order situation in the country, the Nepalese economy, interestingly, witnessed an impressive growth in the foreign investment inflow during the first ten months of the current fiscal year.

During the period, the Department of Industry approved 76 new foreign investment proposals as opposed to just over 50 such proposals during the corresponding period last year. The total project cost, total fixed investment and total foreign investment of the proposed projects are Rs 4.87 billion, Rs 4 billion and Rs 1.76 billion respectively. All projects are anticipated to generate extra employment opportunities for an additional 3,117 people.

Of 68 total foreign investment projects approved by the department last year, the total projects cost and total fixed investment were Rs 2.56 billion and Rs 1.85 billion respectively. Similarly, the total foreign investment of the projects was 1.39 billion and altogether these projects had created jobs for 4,659 people.

Ever since Nepal opted liberal economic policy and opened its doors for the foreign investment, with adequate policy level reforms in the 90s with an aim to minimize the scarcity of capital and relevant technology, altogether 39 countries have invested in 668 projects.

Up to now, the total project cost, fixed investment and foreign investment of the projects of total 668 projects are Rs 72 billion, Rs 62 billion and Rs 17.75 billion respectively. These investments have contributed to generate extra 82,320 employment opportunities.

Among the countries investing in Nepal in the post-reform period, India continued to remain as the dominant foreign investor followed by Japan and the USA. Altogether 230 Indian investments have come to Nepal with Rs 25.539 billion as total project cost, Rs 20.8 billion as fixed investment and Rs 6.31 billion as foreign investment. These projects have so far absorbed 33,492 people.

Similarly, Japan, the second largest foreign investor, has invested in 72 projects so far followed by USA with 69 projects.

Of the total foreign investment projects, which, so far, having received necessary government permission, 246 projects are operating. Similarly, 49 projects are under construction and 140 projects are yet to begin work. Likewise, 17 industries with foreign investment have been closed and 46 licenses given to commence projects have been cancelled due to various reasons. Altogether 7,183 jobs were lost due to the closure and cancellation of 63 industries during the entire post-liberal era.

However, days ahead are tough given deteriorating internal security situation and various investment-friendly measures adopted by the new Indian budget.

"Sound internal security is the underlying condition required to attract foreign investment in the absence of which attracting foreign investment remain nothing more than nightmare," says Dr Minendra Rijal, an economist. He also says that the government should be very serious in curbing the worsening domestic law and order situation.

The Indian budget for the current year, which has been admired as "investment-friendly", among others, has greatly simplified investment procedures. The budget also has introduced a liberal labor regime allowing the entrepreneurs to hire and fire contract laborers. The latest Indian step could not only obstruct aspirant Indian investment into Nepal. In addition, chances of repatriation of projects that have already been established in Nepal are high, given the stringent labor protective laws.

Furthermore, India opened investment in the non-financial institutions up to cent percent. It has also opened up to 49 per cent stake of foreign institutional investors in portfolio investment. These investment attracting measures will play a crucial role in marking up the foreign investment in India, which is already the largest FDI destination in South Asia.

The FDI flow in India, during the first three months of 2001 has registered a robust growth of over 32 per cent to touch US$ 994.4 million as compared to US$ 752 million during corresponding period last year. Under such circumstances, it has become inevitable for Nepal to induce extra efforts to attract more FDI. The protracted defunct one window policy and persisting bureaucratic hassles are some of the obstacles that need immediate attention. Otherwise, investment intended for Nepal in coming days, could find India more fertile.

Impact of tragic incident mulled

Post Report

KATHMANDU, June 12 - Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Employers Council organized a meeting Sunday with major trade unions, with a view to discussing the impact of the tragic incident that took place on June 1 on the commerce and industry sector, according to an FNCCI press release issued here.

The meeting participated in by the representatives of Nepal Trade Union Congress (NTUC), General Federation of Nepalese Trade Union (GEFONT) and Democratic Confederation of Nepalese Trade Union (DECONT) agreed on implementing the agenda of minimum pay, recruitment and collective bargaining, to cope with the difficult situation arisen from the tragic Royal deaths and its consequences.

World Bank condoles Royal demise

Post Report

KATHMANDU, June 12 - The World Bank Nepal Office has expressed condolence over the tragic demise of Their Majesties and the members of the Royal Family.

Mieko Nishimizu, the bank’s vice president for South Asia, issuing a press release today, said, "I believe in the inner spiritual strength of the sovereign people of Nepal, rooted deeply in the their long history and proud heritage."

"I deeply respect the sorrow and the anguish that the people of Nepal are experiencing now. I also have every confidence that they will reach within to find their strength in unity of diversity and to find the energy for the nation building. I am certain that Their Late Majesties would wish none other," she added.

Business activities resume after a long gap

Post Report

KATHMANDU, June 12 - Business activities, which had frozen for ten straight days, the longest public holiday in the modern history, following the Royal massacre at the Narayanhity Palace on June 2, resumed from today.

A week is, however, likely to pass before business activities returns to full normalcy. "Though the official holidays ended, a few more days will pass before business comes back to normal," say businessmen. Albeit the street is full of pedestrians, the market still lacks potential consumers.

"Consumers are cash-strapped since most business activities, including banking services, remained closed during the period," says Rupak Maharjan, a retailer. "Most of the consumers don’t have cash at the moment and it will take some days before normal trade resumes. The first thing people are doing is running to banks," he says. Lines of cash exhausted customers could be seen at most commercial banks waiting their turn for withdrawal.

However, it was not just the high class and middle class families, comprising mostly of service holders, who were affected by the closure of trade activities. The daily wage earners suffered the most. And this was clearly reflected in the market today in the slowdown in the demand of basic commodities.

Says Rajesh Shrestha, a grocer at Ason, "The consumption capacity of most members of the working class has slumped remarkably due to the closure."

Apart from the daily wage earners, goods meant for exports or imports were also stranded at the borders since all government offices, including the customs checkpoints, remained closed during the Royal mourning. Goods meant for household consumption only were traded across the border during the period.

Not just the general public, the resumption of the business activities has also delighted the industrialists. Rabi Bhakta Shrestha, First Vice President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), informed that almost all the industrial activities of the country have resumed.

He, however, said that long closure of essential services, such as banking and financial services, caused some inconvenience to the general people and industries as well.